Centaurus Financial Complaints & Regulatory Actions

Centaurus Financial, Inc. (“Centaurus Financial”) (CRD# 30833) has many different complaints filed by FINRA (Financial Industry Regulatory Authority), state regulatory organizations, and investors. At the Law Offices of Robert Wayne Pearce, we have investigated Centaurus Financial, its regulatory and customer complaints, and have also represented investors with claims of fraud, negligence, and breach of fiduciary duty against this organization and its financial advisors.

If you believe you have a claim against Centaurus Financial, you should strongly consider hiring a securities fraud lawyer. You should not wait until it’s too late to file a claim. The Law Offices of Robert Wayne Pearce, P.A., offers free consultations. Give us a call at 800-732-2889. Let’s discuss your case and see what we can do to help you get the compensation you need and deserve.

Can I Sue Centaurus Financial, Inc.?

If you’ve lost money caused by Centaurus Financial and/or its employees’ misconduct then the answer is, YES,  you can sue Centaurus Financial but the odds are you signed away your right to sue in court and agreed to resolve your dispute in a FINRA arbitration proceeding.  Attorney Robert Wayne Pearce has over 40 years of personal experience in FINRA arbitration proceedings and knows very well how you can not only sue Centaurus Financial in FINRA arbitration proceedings, but WIN that arbitration. The easiest way to know if you have a viable case against Centaurus Financial is to call Attorney Pearce at our office at 800-732-2889.

Investment Losses? We Can Help

Discuss your legal options with an attorney at The Law Offices of Robert Wayne Pearce, P.A.

Get A Free Consultation

or, give us a ring at (800) 732-2889.

What is Centaurus Financial, Inc.?

Centaurus Financial (CRD# 30833) has been registered with the SEC and FINRA as a broker-dealer since 1993. The company is controlled by the Federation of Financial Services and headquartered in Anaheim, California with smaller branch offices throughout the United States.  Its independent broker-dealer Business Model has grown through acquisition and organic development of primarily one and two person registered representative offices supervised remotely. Today there are over 300 Centaurus Financial branch offices with over 430 registered representatives in every state.  It is now one of the 50 largest independent broker-dealer and investment advisory firms in the United States.

Centaurus Financial, Inc. Has Many Different Regulatory Problems   

Centaurus Financial’s rapid growth has not been without consequences. There have been approximately 14 Federal, state and self-regulatory body disclosure events; that is, final and formal proceedings initiated by a regulatory authority (e.g., a state or federal securities agency like the U.S. Securities and Exchange Commission (SEC) or self-regulatory body like the Financial Industry Regulatory Authority (FINRA) and the North American Securities Administrators Association (NASAA) ) for a violation(s) of investment-related rules or regulations. In addition, there have been hundreds of customer complaints filed against Centaurus Financial for misconduct by its securities sales and investment advisory representatives that are not reported by the firm on its Central Depository Record. 

We have reported and written about these regulatory problems and customer complaints over many years. Centaurus Financial is a repeat offender: there are over 7 SEC and FINRA reported disciplinary proceedings citing the firm with one form of supervisory lapses or another.

A BRIEF OVERVIEW OF SOME OF THE REGULATORY PROBLEMS CENTAURUS FINANCIAL HAS FACED OVER THE YEARS*

Centaurus Financial has been repeatedly censured, warned, and fined for its own misconduct and failure to supervise its army of financial advisors.* A few of the notable FINRA Sanctions for its Supervisory Failures are below:

SEC Orders Centaurus Financial To Pay Over $1.25 Million For Mutual Fund Sales Abuse

The SEC investigated Centaurus Financial and found multiple breaches of fiduciary duty and inadequate disclosures by its registered broker-dealer, and investment adviser Centaurus Financial in connection with its mutual fund share class selection practices and the fees it and/or its associated persons received pursuant to Rule 12b-1 under the Investment Company Act of 1940 (“12b-1 fees”).  It found that Centaurus Financial investment advisors purchased, recommended, or held for advisory clients mutual fund share classes that charged 12b-1 fees instead of lower-cost share classes of the same funds for which the clients were eligible.  Centaurus Financial and/or its associated persons received 12b-1 fees in connection with these investments.  Further, Centaurus Financial and/or its associated persons received 12b-1 fees for advising clients to invest in or hold such mutual fund share classes.  Centaurus Financial failed to disclose in its Form ADV or otherwise the conflicts of interest related to (a) its receipt of 12b-1 fees, and/or (b) its selection of mutual fund share classes that pay such fees. 

As a result of its findings, the SEC ordered Centaurus Financial to cease and desist from committing or causing any violations and any future violations of Sections 206(2) and 207 of the Advisers Act, censured the firm, and ordered it to pay disgorgement and prejudgment interest to affected investors, totaling over $1,250,000. 

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FINRA Sanctions Centaurus Financial For UIT Sales Abuse

FINRA investigated Centaurus Financial and discovered that the broker-dealer failed to apply sales charge discounts to certain customers’ eligible purchases of unit investment trusts (“UITs”) in violation of FINRA Rule 2010. In addition, FINRA found that Centaurus Financial failed to establish, maintain and enforce a supervisory system and written supervisory procedures reasonably designed to ensure that customers received sales charge discounts on all eligible UIT purchases in violation of NASD Conduct Rule 3010 and FINRA Rule 2010 for which it was censured and fined $100,000 and ordered to pay restitution to affected customers did not receive sales discounts in excess of $85,000. 

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FINRA Sanctions Centaurus Financial For Not Supervising Wholesalers

Centaurus Financial registered representatives (“wholesale representatives”) functioned as wholesalers for an unaffiliated investment management firm. Although Centaurus Financial contracted to provide “exclusive authority and control over the direction and supervision” of the representatives in connection with wholesaling five of the investment management firm’s fund private placements, Centaurus Financial written supervisory procedures (“WSPs”) did not address the supervision of wholesaling activities and Centaurus Financial did not supervise the wholesaling activities of the wholesale representatives, in violation of NASD Rule 3010.

The wholesale representatives did not use their Centaurus Financial e-mails for their wholesaling activities and instead typically used the investment management firm’s email domain to send communications related to wholesaling the funds. Centaurus Financial did not review or retain those emails in violation of SEC Rule 1 7a-4(b)(4) and NASD Rules 3010(a) and (d)(3) and 3110(a).

The wholesale representatives distributed twelve communications related to the private placements and the investment management firm (including broker-use only materials) to other FINRA member firms. Several of the communications failed adequately to disclose investing risks and were misleading, while many also made unwarranted performance claims and had other sales material content deficiencies in violation of NASD Rules 2210 and 2211.

By violating each of the above NASD rules, Centaurus Financial also violated FINRA Rule 2010 for which it was censured and fined $25,000. 

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FINRA Sanctions Centaurus Financial For Not Protecting Confidential Customer Information

FINRA investigated Centaurus Financial and discovered the broker-dealer failed to protect certain confidential customer records and information, by using an improperly configured computer firewall and employing an ineffective username and password on its computer fax server (“Computer Fax Server”). These failures permitted unauthorized persons to access stored images of faxes received by Centaurus Financial, which included confidential customer information, such as social security numbers, account numbers, dates of birth and other sensitive, personal and confidential data.

Rule 30 of Regulation S-P provides that “[e]very broker, dealer … must adopt written policies and procedures that address administrative, technical, and physical safeguards for the protection of customer records and information. These written policies and procedures must be reasonably designed to: (1) insure the security and confidentiality of customer records and information; (2) protect against any anticipated threats or hazards to the security or integrity of customer records and information; and (3) protect against unauthorized access to or use of customer records or information that could result in substantial harm or inconvenience to any customer.” Centaurus Financial’s failure to adequately protect its Computer Fax Server permitted an unknown individual to conduct a “phishing” scam. When Centaurus Financial became aware of the phishing scam the firm conducted an inadequate investigation and sent a misleading notification letter to affected customers and their brokers, telling them that only one benevolent person had obtained access to its Computer Fax Server.  Centaurus Financial also failed to maintain a supervisory system and procedures that were reasonably designed to comply with Regulation S-P. As a result of all of the above, Centaurus Financial violated Reg. S-P, Rule 30 as well as NASD Rules 2110, 2210, 2211, and 3010, for which it was censured and fined $175,000.

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Why Does Centaurus Financial, Inc. Have So Many Regulatory Problems And Customer Complaints?

Independent broker-dealers are notorious for their lax supervisory practices and procedures. The business model of these franchise type operations is to open many offices nationwide for steady growth of fixed monthly revenues without the costs attendant to a full-service branch office with on-site manager, compliance officer and operation personnel. The registered representatives of these independent broker-dealers generally operate as separately incorporated businesses. They are not employees of the broker-dealer and therefore not controlled in the same manner as full-service brokerage firm representatives. The registered representatives control their structure and costs to maximize profits and often leave the protection of investors’ rights and interests as their lowest priority.

The typical supervisory organization of independent broker-dealer operations is to have other independent contractors operate Offices of Supervisory Jurisdiction (OSJs) to monitor the registered representatives from geographically remote offices and then report to the main franchisor’s compliance office at national headquarters. The supervisors at the OSJs are not employees of the franchisor and often run their own brokerage, insurance and other businesses. They are not devoted full-time supervisors of the smaller branch offices. Consequently, OSJ managers cannot and do not supervise the day-to-day operations of the registered representatives of these Independent broker-dealers. 

Generally, there is no immediate review of new accounts opened, securities transactions, business records, cash or securities receipts and deliveries, correspondence and business activities unrelated to the securities brokerage operation at these independent brokerage firms. The lax supervision leaves investors who have transferred their accounts to the smaller independent broker-dealer vulnerable to sales of securities that have not been reviewed or authorized by anyone other than the sales representative earning a commission. There may be no one onsite to detect forgeries of clients’ signatures on documents, the placement of inaccurate information about a client’s investment objectives and financial condition to document the suitability of a particular investment recommendation. Oftentimes there is no daily review of sales literature and client correspondence to protect against misrepresentations and misleading statements being made to investors. In fact, it is not unusual for there to be only one compliance audit visit per year at many of these offices.

These Independent brokerage business operations are worrisome to the North American Securities Administrators Association (NASAA), which has documented more instances of sales abuse and consequently investor losses at these firms than the traditional brokerage firms with branch offices with on-site managers and compliance personnel.

Did Centaurus Financial, Inc. Advisor Misconduct Cause You Investment Losses?

When financial advisor misconduct has caused you to lose substantial value to your investment accounts, you have the right to seek reimbursement from the responsible parties. Centaurus Financial is responsible like any employer for its financial advisors acts and omissions. In addition, it has an independent duty to supervise its stockbrokers and investment advisors. These cases can be extremely complex, and so having the support of a reputable attorney who is experienced in recovering investment losses for investors is key to your success. Many customers make the mistake of contacting Centaurus Financial without representation with an attorney about their complaints and have their complaints denied.

Related Read: Can You Sue Your Brokerage Firm?

Investment Losses? We Can Help

Discuss your legal options with an attorney at The Law Offices of Robert Wayne Pearce, P.A.

Get A Free Consultation

or, give us a ring at (800) 732-2889.

Consult With An Attorney Who Recovers Investment Losses Caused By Centaurus Financial, Inc. Today!

The securities attorneys at The Law Offices of Robert Wayne Pearce, P.A., have helped countless investors over the last 40 years recover the losses from their investment accounts that were caused by broker negligence or misconduct. The firm has extensive experience with Centaurus Financial cases, and Attorney Pearce is committed to seeing that those responsible for the losses you have suffered are held fully accountable.

Give us a call at 800-732-2889. Let’s discuss your case and see what we can do to help you get the compensation you need and deserve.

Robert Wayne Pearce

Robert Wayne Pearce of The Law Offices of Robert Wayne Pearce, P.A. has been a trial attorney for more than 40 years and has helped recover over $170 million dollars for his clients. During that time, he developed a well-respected and highly accomplished legal career representing investors and brokers in disputes with one another and the government and industry regulators. To speak with Attorney Pearce, call (800) 732-2889 or Contact Us online for a FREE INITIAL CONSULTATION with Attorney Pearce about your case.

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